United States

United States

A MARKET STILL IN THE MAKING

1 January 1995

California used to be far ahead in world watching activities such as wind development and environmental considerations. Now the same environmental lobbies are voicing valid concern over avian mortalities in wind farms at the same time as they push nuclear reactor technology, as if the growing piles of radioactive waste were a minor problem. The author is convinced, however, that people will eventually opt for clean electricity.

. Asmus, Energy reporter for US trade press.

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Looking back over the last ten years it is astonishing how the American market for wind power has shifted in directions. Yet in retrospect, aspects of the past really pointed the way to the future. California was the centre of the universe for the wind power industry in 1985. Developers from around the world had descended upon these golden hills not because of any amazing quantities of wind -- other countries and US states have far better -- but because of government policies.

State authorised tax credits and 30 year fixed capacity price power purchase contracts known as Interim Stand Offer 4 (ISO4), combined with federal laws allowing for private enterprise to enter the electric generation business, created the modern wind power industry. As did support from the environmental community. Where are California's state policy makers today? And what can we infer about the future US market by their most recent actions as well as those of competitors and environmentalists?

The California Public Utilities Commission (CPUC) completed the state's first competitive auction for new power supply some time ago. The results of the auction, known as the Biennial Resource Plan Update (BRPU), shocked many. Prices for wind power were less than $0.05/kWh. Wind developers even beat the cost of large utility fossil fuel plants as proposed by Southern California Edison. While the ISO4 contracts hatched in the 1980s were the key to making the early projects work, because they provided a lucrative revenue stream they have become the object of wrath of utilities who complain about the higher cost of clean, renewable energy. The BRPU results seemed to take away that argument, showing that clean could cost less than dirty. However, odd bidding strategies created a new controversy which motivated the state's utilities to continue to bash independent renewable energy projects.

Uncertainty at a critical juncture

The CPUC, once the wind industry's primary governmental partner, has seemed to align itself with utilities and introduced great uncertainty at a critical time for the wind power industry. Not only did it drag its feet in certifying the results of the BRPU, but it unveiled a radical plan to further deregulate the state's utility industry driven, indirectly, by the high cost of the state's renewable energy projects.

This re-structuring, whatever its final form, is both an obstacle and opportunity for those wishing to exploit the vast wind energy potential of the United States. California's energy cops are, at present, still scratching their heads over how to account for the social benefits of wind power in a market environment. Regardless of the outcome of this bureaucratic exercise, the momentum building in support of wind power is virtually unstoppable. That's because wind is a logical option for any utility -- or regulator for that matter -- that understands that markets need to be based on real world considerations such as fuel diversity, air pollution and management of limited fossil fuel resources.

And yet, uncertainty will thwart near term opportunities. Ironically, many US based developers are being forced to look at markets in other countries first before they can continue with further wind projects on their own turf. Beyond the cops, however, are two other counter forces that may also reduce near term wind power market opportunities. The first is hardly a surprise. The vested interests which want to maintain the status quo -- oil, coal and nuclear lobbies -- are busy trying to discredit wind power. While the natural gas developers represent the main competition to wind power, their tactics are far less desperate because of the ample opportunities that exist for them in the US and global marketplace.

Perhaps the most ironic change in posture over the last decades comes from the nuclear industry, which is using environmental claims to not only push nuclear reactor technology (Look! No air emissions), but to bash wind power due to the concerns over avian mortality. This twisted turn of events is augmented by the fact that these nuclear zealots are frequently being helped by members of the Sierra Club, perhaps the most powerful environment lobby in the world, and other environment organisations which helped legitimise wind power in the first place some ten to 15 years ago.

A perspective on bird concerns

Yes, concerns over protected species of birds are real. But they need to be put into perspective. The shrill rhetoric of the nuclear lobby, which clearly fails to see the danger in growing stockpiles of radioactive waste, has cost wind power some important allies. Luckily, this rhetoric is being countered by organisations such as the Center for Energy Efficiency and Renewable Technologies (CEERT), based in Sacramento, which includes both the leading US wind developers -- Kenetech Windpower and Zond Systems -- as well as leading environmental groups such as the Sierra Club, Natural Resources Defense Council, Union of Concerned Scientists and others. CEERT is attempting to open communication over such issues in the hope that collaborative solutions will help bring some environmentalists on board.

The second force running counter to wind energy is that segment of the environmental population which will never be satisfied. The so called Not In My Backyard (NIMBY) syndrome, which has already hit wind development in Washington and Montana, will remain a long term obstacle to wind power development in the US, as well as elsewhere.

The American Wind Energy Association has set a goal of installing 10,000 megawatts of wind power by the end of the decade. This, no doubt is a rather optimistic view. Just as state energy cops were incorporating the environmental values that tip the scale in favour of wind power, California dropped its deregulation bomb. A free power market might be no bad thing for wind power in the long run, as long as external costs are a part of it. But in the short term, the wind market that was emerging has now been buried under a pile of bomb debris.

The chill is temporary

Wind projects have found far greater support in other parts of the country, including Minnesota, Texas, New England and the Pacific Northwest. But the threat of utility restructuring, launched by the very state agency most directly responsible for today's wind industry, will likely put a chill on the US market over the next several years. This pause will be temporary, though. The dramatic improvements in technology, when coupled with lower and lower costs of wind power generation, support the promise of long term growth. The truly fascinating question is what will the landscape of America look like ten years from now, when Windpower Monthly celebrates two decades of publishing. Here are two predictions: first, there will be no additional nuclear capacity added to the US grid and second, wind turbines will be as common in the American landscape as their predecessors, the water pumping windmills of the last century.

As I stated at the outset, the past points the way to the future. State energy cops, dinosaur technologies such as nuclear power and tree hugging environmentalists were all instrumental in bringing wind power to America and the rest of the world. These same three groupings are critical players in determining the future, though today they present more obstacles than they support. But the most important factor is the technology itself. Sooner or later, fundamentals prevail. The people in the US, as well as the rest of the world, prefer low cost, clean electricity. And wind power fits the bill.

Peter Asmus has covered energy issues for US trade press for over seven years. He is also co-author of In Search of Environmental Excellence (Simon & Schuster 1990) and is currently working on a book about wind power.